Foreign Trade Deficit Worsens To N2.39 Trillion Amid Further Increase In Import Bill In Q3 2020

Freshly released foreign trade statistics report showed that merchandise goods worth N8.37 trillion were traded in Q3 2020, 34.15% higher than N6.24 trillion recorded in Q2 2020 (but 8.85% lower than N9.19 trillion printed in Q3 2019).

Of the total goods traded, the value of exports increased quarter-on-quarter (q-o-q) by 34.85% (but decreased year-on-year, y-o-y, by 43.41%) to N2.99 trillion in Q3 2020, while the value of imports rose q-o-q by 33.77% (and surged y-o-y by 38.02%) to N5.38 trillion in Q3 2020, resulting in the higher trade deficit of N2.39 trillion in Q3 2020 (from an N0.42 trillion trade deficit in Q2 2020); a complete reversal from an N1.39 trillion trade surplus printed in Q3 2019). According to the report, crude oil exports which increased q-o-q by 56.04% (but fell y-o-y by 35.30%) to N2.42 trillion, constituted 81.02% of total export value in Q3 2020.

Non-crude oil exports decreased q-o-q by 14.64% (and declined y-o-y by 63.12%) to N0.57 trillion in Q3 2020, constituting 18.98% of the total export value. Further breakdown of the non-crude oil exports showed that manufactured goods, which has the highest weight, registered a decline of 47.67% and 86.66% to N132.99 billion in Q3 2020 from N254.18 billion and N996.78 billion in Q2 2020 and Q3 2019 respectively.

Foreign Trade Statistics

On the import side, capital goods bill (machinery for the production of other goods and transport equipment) which constituted 35.56% of the total imports rose to N1.93 trillion in Q3 2020 from N1.59 trillion in Q2 2020 (and from N1.84 trillion in Q3 2019). Import bills on Chemicals & related products, Food & live animals and Manufactured goods, constituting 19.28%, 15.16% and 9.74% respectively, rose to N1.04 trillion, N0.82 trillion and N0.52 trillion respectively in Q3 2020 from N0.78 trillion, N0.65 trillion and N0.48 trillion respectively in Q2 2020 (and from N0.56 trillion, N0.38 trillion and N0.34 trillion respectively in Q3 2019).

Europe and Asia continued to dominate Nigeria’s export destinations; even as export value to Europe rose sharply by 26.57% to N1.24 trillion in Q3 2020 from N0.97 trillion in Q2 2020 (but moderated from N1.86 trillion in Q3 2019). Also, exports to Asia ballooned by 52.46% to N1.12 trillion in Q3 2020 from N0.73 trillion in Q2 2020 (but fell from N1.36 trillion in Q3 2019). Of the total exports in Europe and Asia, Spain and India recorded the highest trades: exports to Spain and India were N0.33 trillion and N0.50 trillion respectively.

Meanwhile, the value of exports to African countries increased to N0.44 trillion in Q3 2020, from N0.40 trillion in Q2 2020 (but fell from N1.45 trillion in Q3 2019). Elsewhere, crude oil prices headed for a sixth consecutive week of gains despite Moody’s expectation that crude oil price may hover around USD45 per barrel in 2021. The West Texas Intermediate (WTI) crude price rose w-o-w by 2.49% to USD46.78 a barrel gave the 3.03% w-o-w rise in US crude oil input to refineries to 14.44 mb/d as at December 4, 2020 (albeit, It declined y-o-y by 13.05% from 16.59 mb/d as at December 6, 2019).

Also, Brent price rose by 4.56% to USD50.93 a barrel as at Thursday, December 10, 2020, even as Bonny Light increased by 4.15% to USD50.70 a barrel. However, we saw the U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) rose by 3.11% w-o-w to 503.23 million barrels as at December 4, 2020 (also, inventories have risen by 12.35% y-o-y from 447.92 million barrels as at December 6, 2019).

The foreign trade deficit worsened in Q3 2020, despite the rise in crude oil prices, amid the rise in import bill. We are yet to see sufficient improvement on the export side as the impact of COVID-19 pandemic and the Endsars protest still lingers. Thus, Nigeria needs to activate infrastructure and policies that would enhance the quality of locally-made products, for global competitiveness, in order to increase export proceeds and stabilize its currency.